What happens when you scrap mandatory car parks at new housing developments?

Australia is building parking spaces nobody wants, and charging the people who can least afford it for the privilege. A new Grattan Institute report puts hard numbers on something urban planners have known for years: mandatory minimum parking requirements embedded in our planning codes are a stealth tax on housing, one that adds tens of thousands of dollars to the cost of every new apartment whether the occupant owns a car or not.

Mandatory parking adds up to $137,000 per apartment — whether residents own a car or not

Grattan's figures are stark. A mandatory parking space adds roughly $70,000 to a typical two-bedroom apartment in Sydney, $62,000 in Melbourne, $113,000 in Brisbane, $95,000 in Adelaide, and $137,000 in Perth. That is not the market pricing a convenience. That is a planning rule forcing a developer to build something, and forcing a buyer or renter to pay for it, regardless of whether either party would have chosen it freely.

The waste embedded in this system is not trivial. In Sydney and Melbourne, off-street parking accounts for 13 per cent of the built floor space of apartment blocks. Up to 40 per cent of those spaces sit empty overnight. About 40 per cent of households in studio or one-bedroom apartments own no car at all. The report estimates that Australia spends more than $1 billion a year constructing unwanted off-street parking, and that over the next five years those requirements will consume $5.2 billion in construction resources that could instead build roughly 9,000 additional homes.

The $5.2 billion in construction resources diverted to unwanted concrete over the next five years is a genuine policy failure with a genuine policy fix.

Removing minimums could tip 140,000 dwellings into commercial viability

The supply argument is, if anything, more compelling than the cost argument. Grattan estimates that removing parking minimums could tip an additional 140,000 dwellings in Sydney and Melbourne into commercial feasibility, homes that do not currently get built because parking costs make the numbers impossible. That is not a marginal adjustment. In a housing market where undersupply has been the central driver of unaffordability for a decade, adding 140,000 viable dwellings to the feasibility ledger matters.

So far, so persuasive. But there is a structural question the report raises and then partially answers, and the partial answer is the important part.

The cars don't disappear — they move to the kerb outside your neighbours' houses

Parking minimums exist for a reason. They were introduced to prevent exactly the outcome that critics of car-dependency now want: fewer residents driving and parking on residential streets. Remove the off-street requirement, and some of those cars do not disappear. They move onto the street. In suburbs without decent public transport, in households with children, in outer metropolitan areas where a car is not optional, residents who move into a parking-free building but still own a vehicle will park somewhere. That somewhere is the kerb outside their neighbours' houses.

This is not a hypothetical. Cities that have removed parking minimums without managing on-street supply have seen exactly this pattern. The cost shifts from the new resident, who no longer pays for a car space in their building, to the existing resident, whose street becomes harder to park on. The housing affordability problem is partially solved for one group by creating an amenity problem for another.

On-street pricing is the right fix — and the one governments will be tempted to skip

Grattan knows this, and proposes the right corrective: state and local governments should manage on-street demand through parking permits, time limits, and user charging. This is the correct policy architecture. Parking should be priced at its real value, not artificially suppressed through free kerb access and then cross-subsidised through mandatory off-street provision in new buildings. A well-designed permit scheme in high-demand streets would allow that rebalancing to happen honestly.

The problem is that this is the politically difficult half of the reform, and it tends to get skipped. Removing a mandatory minimum from a planning code is an administrative change. Introducing residential parking permits, or street pricing, requires a state or council government to charge people who currently pay nothing for something they consider a birthright. The incentives point strongly toward doing the easy part and deferring the hard part indefinitely.

That sequencing risk is where this reform either works or doesn't. The Grattan proposal is coherent as a package. Minimum parking requirements are a blunt, expensive instrument for a problem that should be managed directly. The $5.2 billion in construction resources diverted to unwanted concrete over the next five years is a genuine policy failure with a genuine policy fix. The analysis holds.

But a government that announces the removal of parking minimums while quietly shelving the on-street management component is not solving the housing problem. It is laundering it. The car does not go away. It just stops sleeping in the building and starts sleeping in the street.

Sources

Grattan Institute — Axe car-parking rules to cut the cost of housing

Frequently Asked Questions

How much does a mandatory parking space add to the cost of an apartment in Australia?
It depends on the city, but the costs are substantial everywhere. A mandatory parking space adds roughly $70,000 to a two-bedroom Sydney apartment, $62,000 in Melbourne, and as much as $137,000 in Perth. Buyers and renters pay these costs whether they own a car or not.

What happens to parking when minimum requirements are removed?
Residents who still own cars park on the street instead. Cities that have removed parking minimums without introducing on-street management have seen kerb pressure increase in residential streets near new developments, shifting the cost from new residents to existing neighbours.

Why are parking minimums a housing affordability problem?
Because they force developers to build car spaces regardless of demand, and those costs are passed on to every buyer or renter in the building. About 40 per cent of households in studio or one-bedroom apartments own no car, meaning they are paying tens of thousands of dollars for infrastructure they will never use.

How many homes could Australia build if it scrapped parking minimums?
Grattan estimates removing parking minimums could make an additional 140,000 dwellings commercially viable in Sydney and Melbourne alone. The construction resources currently consumed by unwanted parking over five years could instead build roughly 9,000 additional homes.

What policy needs to accompany the removal of parking minimums for it to work?
On-street demand management — residential parking permits, time limits, and user charging — needs to be introduced at the same time. Without it, the cost of parking is not eliminated but shifted from new residents onto existing neighbours who lose kerb access.